A Hybrid insurance product is basically a combination of two insurance products which may include few featured of financial instrument, however not necessarily accessing the capital market.
A variety of Hybrid products have been developed. Hybrid insurance plans have been primarily innovated by the insurance companies providing private long-term care insurance. This is one of the ongoing and quickly developing advancement in the insurance market. In light of the customers’ demands, the insurance business has made innovative combinations, or ‘hybrid’, and other wellbeing strategies.
These courses of action offer health advantages which are given by annuity or life coverage and any other long-term insurance plans. The historical background is mainly the continuing interest of government and policy-makers to increase such innovations especially in the long-term care insurance to reduce strain on the payment of such facilities in the long run.
This not only helps in curbing the spiraling cost of affording long term care insurance for the insured as well as reduces the risk factor, thus benefiting the profit motive insurers. Thus, it is more convenient for the insured because of variety of benefits offered by hybrid product than compared to a traditional insurance product. In addition to this hybrid insurance plans though enables economies of scale, the charge on premiums differ from person to person depending on the age and health conditions.
Nature of Long-Term Care Insurance:
The nature of such insurance is to cover for all the costs and expenses incurred for the services done to ensure well-being of the individual. It becomes more useful where an insured is suffering with a certain disability and need constant care. A certain class of financial loss due to such disability will be covered under such insurance.
This is different from a health insurance which is prevalent in India. The concept of long term care insurance (hereinafter referred to as LTC) is new to India because of its limited customers and high premium. However, the traditional long-term care insurance unlike reimbursing medical expenses for certain illness, it also covers the day to day care taken to ensure the health of the customer.
The introduction of long term care insurance has been long brought up by the IRDAI, which has recently started formulating guidelines for the long-term care insurance. This is because of the growth of health care in India and the new development based on the need for a now innovative policy in the insurance sector.
This is also different from the Term insurance as long-term care insurance primarily covers the expenses of basic needs of aging people. Ostensibly, these insurances may sound expensive, but they are feasible with the growth of nuclear family, increase in population of older people, and so on. Additionally, they also provide tax benefits.
Nature of Disability Insurance:
Disability insurance is basically that the insurer provides for financial benefits that maybe equal to the income the insured could have earned in the absence of disability. Usually it replaces the a portion of your lost income caused due to such disability. Disability insurance includes both short term disability benefits as well as long term disability benefits.
Additionally, disability insurance policy can be taken for permanent disability or temporary disability; full disability or partial disability, and depending on the degree of disability, shall the insurance company shall make payment. It ensures financial security to your lifestyle and family in case of any unfortunate circumstances.
This type of insurance is usually taken by the employer of an organization on behalf of the employees and in case of any misfortune, the insurance company shall pay monthly benefits for the lost period, however in this case this insurance taken by the employer is subject to taxes unlike a purchase of disability insurance by a non-employee. Disability insurance are importance as much as health insurance in India.
The growth and scope of disability insurances in private sector is very limited, exactly why the need for awareness of disability insurance as based on the recent report on the survey of disabilities in India.
Difference Between Disability And Long-Term Care Insurance:
Most of the time, these insurance policies overlap and misunderstood to be more or less the same. However, there are unique elements in each insurance that distinguishes one from the other. Ostensibly, both help in financial planning, nevertheless, have distinct characteristics.
Disability insurance is monthly benefits provided to the disabled and his family only for a specific time or until the retirement age, which is usually 65 years. While, having a long-term care insurance extends until the maturity or as long as such care and services is necessary for the insured.
Hybrid of Disability And Long-Term Care Insurance And Its Feasibility In India:
According to the World Bank, more than 40% of hospitalized people borrow money or sell assets to cover expenses and 35% fall below the poverty line. Disability protection and life coverage are ordinarily bought before in life than long- term care protection.
Thus, if hybrids of long term care protection with both of these two kinds of protection were showcased to people at ages when incapacity and life coverage are ordinarily advertised, these combinations could have a helpful impact of empowering the growth of such insurances.
In India, the recognition for hybrid insurance models began around the early months of 2015 and later on based on the report conferred by the Confederation of Indian Industries (CII) recommended the introduction of hybrid model as an implementation step towards universal health coverage.
Thus, the IRDA in 2016 introduced the IRDA (Health Insurance) Regulations 2016 which covered hybrid or combinations plans of health insurance with any life insurance plan, which is still practiced in India. However, what observe that the scope of hybrid insurance plans in India is only limited to life insurance. The development in such area is the need of the hour.
Even with the existence of disability insurance, the concept of long term care insurance is relatively new term, though they maybe a part of the health insurance per se. However, it is not always necessary that all health insurance plans are also long-term care insurance plans.
It creates the impression that undeniable hybrids that significantly protect against the dangers secured by the both the protection plans are uncommon in the market. This may demonstrate that one potential interest of hybrid insurance of long-term care is that they enable the purchaser to buy one strategic plan that guarantees against two dangers, despite the fact that scope will be restricted for the existence of both the risks.
Rather, the protection gives the adaptability of paying out which is subjected upon which misfortune happens first and repayment for the same. The hybrid protection items may subsequently exhibit one approach to accomplish a fractional and second-best answer for the issue of numerous critical dangers. The few long- term care insurance hybrid with disability protection plan are deserving of further examination.
Such combinations can enable the purchaser to assess in a reasonable procedure, the potential needs to supplant income lost because of incapacity and in addition to pay for that might be required health care services and necessities because of the handicap, and may advice the insured to buy an insurance on the risk that has not been covered under the combined risk.
At the same time, it is better than getting separate insurance covers for varied misfortunes that may be the result of disability. Therefore, hybrid protection items will require a well aware customer with a specific end goal to settle on the money-related choice that is best for him or her. This type of insurance has been emerging aspect and since IRDA is gradually recognizing this insurance product, it can be inferred that the need is real, and the government must act swiftly for consumer protection.
Credit File: http://www.legalserviceindia.com/